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December 6, 2021

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Why people pay to get into supermarkets?

At first, it seems against basic instinct that people would pay for “admission” to a supermarket.

But the membership-only supermarket model in China has prospered over the years, and new formats have taken shape.

It seems that the minimalist architecture and design motto of “less is more” is essential for the modern consumer-driven society as well when people are avoiding the nut-cracking process to choose from tons of deals and special packages.

Multinational and local retailers are coming to Shanghai with new shopping formats as consumption demand evolves, giving niche players as well as established new incentives to upgrade services and offerings.

Shoppers are favoring a simple and direct shopping experience with a handful of categories to choose from instead of seemingly limitless merchandise laid out in an expansive shopping space.

Metro said its total number of stores in China would reach 101 by the end of this year and will start the renovation of existing stores to include more leisure shopping areas.

Tim Horton’s will also open mini-stores inside the Metro stores to provide easy-to-access coffee and bakery offerings for shoppers, with seven “Tim’s Go” format already operational in four cities and more set to open in the near future.

By January 2022, Tim Horton’s plans to open at least nine “Tim’s Go” shops in domestic Metro stores.

Jade Zhang has been a Sam’s Club member since about two years ago because she enjoys the speedy delivery and fresh food.

“I purchase for the family recipe about once a week, and the cooking materials always live up to quality standards. It saves me time in choosing from the various offerings and comparing prices,” she said.

The quality of fresh food is of essential importance while preparing meals, and it seems to her that Sam’s Club’s offerings are worth the price.

Avid shoppers at Sam’s Club often point to exclusive items and seasonal fresh food from certain geographical locations and product origins as the most attractive aspects at the big-box retailer.

The choice seems to be one between being given the freedom to choose and being offered a selection of premium products collected by experienced merchandising staff.

Costco is to open its second store on the Chinese mainland on Wednesday in Suzhou in neighboring Jiangsu Province as it views the Yangtze River Delta region as the most vibrant sector for the retail market.

Close to one of Suzhou’s high-speed railway stations, it will cover 51,000 square meters of space with two floors of parking area.

To woo new members, it’s offering a 100-yuan (US$16) discount for its original membership plan with a price of 299 yuan until early December.

Alibaba’s grocery and fresh food chain store Freshippo is adding a new membership store in northern Shanghai’s Baoshan District, the third membership Freshippo store in the city.

Competition is obviously heating up. Retailers are vowing to stay attuned to consumer demand with latest offerings of snacks, ready-to-heat meals, and bakeries.

Carrefour last month announced an ambitious plan to open over 30 membership-only stores in the next five years to focus on selected products.

But within just one day of its debut store opening in Shanghai, it received notice from suppliers that a certain rival supermarket had pressured them to pull out of the Carrefour store to cripple its normal operations.

Industry watchers said there’s still quite a limited number of home brands and exclusive items at each membership model store, so they can’t truly be distinctive from each other at the current stage.

Retailers need to work on more meticulous methods and operation models to sustain future development, and the current retail situation requires stronger merchandising capability instead of just relying on the current distribution network, said Pei Liang, director at the China Chain Store & Franchise Association.

Regional players with strong merchandising and supply chains have proved to be more risk-resistant instead of relying only on suppliers to provide ample products, he pointed out.

For many other consumers, there’s a much wider shopping choice instead of focusing on only one supermarket.

Echo Yan, a marketing consultant who lives on her own with two dogs, said she orders a simple meal from food takeaway platforms on a normal working day and sometimes cooks on weekends.

“There are plenty of shops to choose from, and I prefer smaller portions for my weekend meals instead of bulk purchases,” she said.

Metro said it has accumulated over 2 million paid individual memberships, while Sam’s Club claims a membership base of over 4 million on the Chinese mainland. The user base of its premium membership in October of this year was double that from a year ago.

Over one-third of those who became new Sam’s Club members are aged below 30 as a new generation of shoppers are embracing the new trend.

Metro said over 60 percent of businesses in China have paid members, so it’s allocating more resources to draw in more foot traffic.

Saving shopping time and simplifying the process as well as the comfortable brick-and-mortar experience are among its priorities in China, according to Chen Zhiyu, deputy chief executive officer of Metro China.

Although shoppers demand high value for cost when they purchase everyday groceries, they are also asking for reliable products and a comfortable shopping experience.

Metro has added two small-box membership only stores earlier this year and said it has received favorable preliminary results.

A total of 16 stores will undergo renovation soon with the rest scheduled to be carried out next year.

“Consumer-centric” certainly has a different meaning in China with delivery services now an essential demand for food and groceries.

All membership stores have set up online storefronts and delivery formats either handled by its own staff or other third-party service providers to retain long-term shoppers and turn them into returning paying members.

Whoever adopts the latest offerings and tweaks their service at the fastest speed certainly will take the leading position in the increasingly competitive landscape.


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